The Blog

Interview with Tadas Viskanta’s Abnormal Returns

Here’s a fun Q&A with Tadas Viskanta on his incredible Abnormal Returns. First question and answer and then the link:

AR: As you note early in the book, contrarian investing is based on the idea of mean reversion. I hate to be the ‘it’s different this time’ but is the digital, winner-take-all, age different enough that we need to re-think the power of mean reversion for companies and by extension as investments?

TC: It is cyclical or secular? That’s the million-dollar question. The reality is this, it always looks different this time. Creative destruction has been going on since, say, the beginning of the industrial revolution. But value investors have prospered disproportionately by buying cheap earnings and assets. And the only place to find those is among the seeming losers in this digital, winner-take-all economy.

It’s a behaviorally unpleasant position to take. For example, everyone knows Amazon is going to crush all before it. And everyone knows the history of retail is that new concepts destroy legacy retailers. You’d have to be blind or an idiot to buy retail. But Amazon is expensive and some retail is cheap. Some will adapt. There are spots to make smart bets on mean reversion there.